<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1999 Commission File Number 1-1687
-------------- ------
PPG INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0730780
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
One PPG Place, Pittsburgh, Pennsylvania 15272
(Address of principal executive offices) (Zip Code)
(412) 434-3131
(Registrant's telephone number, including area code)
As of March 31, 1999, 173,706,532 shares of the Registrant's common stock, par
value $1.66-2/3 per share, were outstanding.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--------- ---------
<PAGE>
PPG INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
Part I. Financial Information
Item 1. Financial Statements:
Condensed Statement of Income.......................................... 2
Condensed Balance Sheet................................................ 3
Condensed Statement of Cash Flows...................................... 4
Notes to Condensed Financial Statements................................ 5-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 11-17
Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 17
Part II. Other Information
Item 2. Change in Securities and Use of Proceeds........................ 18
Item 4. Submission of Matters to a Vote of Security Holders............. 18
Item 6. Exhibits and Reports on Form 8-K................................ 19
Signature................................................................... 20
</TABLE>
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ------------------------------
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Statement of Income (Unaudited)
-----------------------------------------
(Millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31
-------------------------------------------
1999 1998
--------------------- --------------------
<S> <C> <C>
Net sales......................................................... $1,803 $1,913
Cost of sales..................................................... 1,103 1,145
------ ------
Gross profit................................................... 700 768
------ ------
Other expenses (earnings):
Selling, general and administrative............................ 286 263
Depreciation................................................... 91 89
Research and development....................................... 67 67
Interest....................................................... 26 30
Business divestitures and
realignments (Note 3)........................................ 24 -
Other charges.................................................. 21 18
Other earnings................................................. (23) (27)
------ ------
Total other expenses net.................................. 492 440
------ ------
Income before income taxes and minority
interest....................................................... 208 328
Income taxes...................................................... 79 126
Minority interest................................................. 6 10
------ ------
Net income........................................................ $ 123 $ 192
====== ======
Earnings per common share (Note 2)................................ $ 0.71 $ 1.08
====== ======
Earnings per common share - assuming
dilution (Note 2).............................................. $ 0.70 $ 1.07
====== ======
Dividends per share............................................... $ 0.38 $ 0.34
====== ======
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of this statement.
-2-
<PAGE>
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Balance Sheet (Unaudited)
-----------------------------------
<TABLE>
<CAPTION>
March 31 Dec. 31
1999 1998
------------------ ------------------
Assets (Millions)
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................... $ 82 $ 128
Receivables-net................................................ 1,438 1,366
Inventories (Note 4)........................................... 948 917
Other.......................................................... 257 249
-------- --------
Total current assets....................................... 2,725 2,660
Property (less accumulated depreciation of
$3,860 million and $3,834 million)............................. 2,874 2,905
Investments....................................................... 247 263
Goodwill (less accumulated amortization of
$85 million and $84 million)................................... 586 576
Other assets...................................................... 1,003 983
-------- --------
Total...................................................... $ 7,435 $ 7,387
======== ========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Short-term borrowings and current
portion of long-term debt.................................. $ 777 $ 637
Accounts payable and accrued liabilities....................... 1,202 1,264
Income taxes................................................... 66 11
-------- --------
Total current liabilities.................................. 2,045 1,912
Long-term debt.................................................... 1,066 1,081
Deferred income taxes............................................. 434 440
Accumulated provisions............................................ 448 444
Other postretirement benefits..................................... 548 543
-------- --------
Total liabilities.......................................... 4,541 4,420
-------- --------
Commitments and contingent liabilities (Note 8)..................
Minority interest................................................. 97 87
-------- --------
Shareholders' equity:
Common stock................................................... 484 484
Additional paid-in capital..................................... 106 105
Retained earnings.............................................. 5,849 5,791
Treasury stock................................................. (3,276) (3,198)
Unearned compensation.......................................... (136) (149)
Accumulated other comprehensive loss (Note 5).................. (230) (153)
-------- --------
Total shareholders' equity................................. 2,797 2,880
-------- --------
Total...................................................... $ 7,435 $ 7,387
======== ========
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of this statement.
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<PAGE>
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Statement of Cash Flows (Unaudited)
---------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
March 31
------------------------------------
1999 1998
------------------ ----------------
(Millions)
<S> <C> <C>
Cash from operating activities.................................... $ 125 $ 219
------ ------
Investing activities:
Capital spending
Additions to property and investments...................... (120) (108)
Business acquisitions, net of cash balances
acquired............................................... (89) (72)
Reduction of investments....................................... 12 1
Other.......................................................... 11 1
------ ------
Cash used for investing activities......................... (186) (178)
------ ------
Financing activities:
Net change in borrowings with
maturities of three months or less......................... 175 78
Proceeds from other short-term debt............................ 69 40
Repayment of other short-term debt............................. (68) (31)
Proceeds from long-term debt................................... 1 4
Repayment of long-term debt.................................... (28) (32)
Repayment of loans by employee stock
ownership plan............................................. 13 13
Purchase of treasury stock, net................................ (79) (41)
Dividends paid................................................. (66) (60)
------ ------
Cash provided by (used for) financing activities........... 17 (29)
------ ------
Effect of currency exchange rate changes
on cash and cash equivalents................................... (2) -
------ ------
Net (decrease) increase in cash and cash equivalents.............. (46) 12
Cash and cash equivalents, beginning of period.................... 128 129
------ ------
Cash and cash equivalents, end of period.......................... $ 82 $ 141
====== ======
</TABLE>
The accompanying notes to the condensed financial statements are an integral
part of this statement.
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<PAGE>
PPG INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Financial Statements (Unaudited)
---------------------------------------------------
1. Financial Statements
--------------------
The condensed financial statements included herein are unaudited. In the
opinion of management, these statements include all adjustments, consisting
only of normal, recurring adjustments, necessary for a fair presentation of
the financial position of PPG Industries, Inc. and subsidiaries (the
Company or PPG) at March 31, 1999 and the results of their operations and
their cash flows for the three months ended March 31, 1999 and 1998. These
condensed financial statements should be read in conjunction with the
financial statements and notes thereto incorporated by reference in PPG's
Annual Report on Form 10-K for the year ended December 31, 1998.
The results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the full year.
2. Earnings Per Common Share
-------------------------
The following table reflects the earnings per share calculations for the
three months ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended March 31
-----------------------------------------
(Millions, except per share amounts) 1999 1998
------------------- --------------------
<S> <C> <C>
Earnings per common share
Net income.............................................. $ 123 $ 192
------ ------
Weighted average common shares
outstanding........................................... 174.2 177.5
------ ------
Earnings per common share............................... $ 0.71 $ 1.08
====== ======
Earnings per common share-
assuming dilution
Net income.............................................. $ 123 $ 192
------ ------
Weighted average common shares
outstanding........................................... 174.2 177.5
Effect of dilutive securities:
Stock options......................................... 0.4 0.9
Other stock compensation plans........................ 1.2 1.0
------ ------
Potentially dilutive common shares...................... 1.6 1.9
------ ------
Adjusted common shares
outstanding........................................... 175.8 179.4
------ ------
Earnings per common share-
assuming dilution..................................... $ 0.70 $ 1.07
====== ======
</TABLE>
-5-
<PAGE>
3. Acquisitions, Business Divestitures and Realignments
----------------------------------------------------
In January 1999, the Company completed the acquisition of the remaining
portion of the global packaging coatings business formerly owned by
Courtaulds plc from Akzo Nobel N.V. and completed the purchase of certain
leased assets in connection with its 1998 acquisition of the technical
coatings business of Orica Ltd. In February 1999, the Company acquired the
commercial transport refinish coatings business of Sigma Coatings B.V., a
subsidiary of Belgian refiner PetroFina S.A. The Company has completed
preliminary purchase price allocations for these acquisitions and the
operating activity associated with these acquisitions has been included in
the Company's operations from the acquisition dates. The preliminary
purchase price allocations are subject to adjustment in 1999 when
finalized.
In March 1999, the Company approved a restructuring plan associated with
the integration of recent packaging coatings acquisitions, which resulted
in a pre-tax charge of $24 million. The components of the plan included
severance benefits for 182 employees and an estimated loss of $14 million
on the disposal of a redundant European facility. As of March 31, 1999,
$0.4 million of severance benefits had been paid under the plan. It is
anticipated that the asset disposition and the payment of the remaining
severance benefits will occur within a year.
4. Inventories
-----------
Inventories at March 31, 1999 and December 31, 1998 are detailed below.
<TABLE>
<CAPTION>
March 31 Dec. 31
1999 1998
------------------- --------------------
(Millions)
<S> <C> <C>
Finished products and work in process........................ $ 656 $ 638
Raw materials................................................ 187 174
Supplies..................................................... 105 105
----- -----
Total.................................................... $ 948 $ 917
===== =====
</TABLE>
Most domestic and certain foreign inventories are valued using the last-in,
first-out method. If the first-in, first-out method had been used,
inventories would have been $170 million and $183 million higher at March
31, 1999 and December 31, 1998, respectively.
-6-
<PAGE>
5. Comprehensive Income
--------------------
Total comprehensive income for the three months ended March 31, 1999 and
1998 was as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1999 1998
---- ----
(Millions)
<S> <C> <C>
Net income................................................. $ 123 $ 192
----- -----
Other comprehensive loss, net of tax:
Currency translation adjustment......................... (71) (11)
Minimum pension liability adjustment.................... (1) -
Unrealized losses on marketable securities.............. (5) -
----- -----
(77) (11)
----- -----
Total comprehensive income........................... $ 46 $ 181
===== =====
</TABLE>
As of March 31, 1999 and December 31, 1998, accumulated other comprehensive
loss, as reflected on the condensed balance sheet, was comprised of the
following:
<TABLE>
<CAPTION>
March 31 Dec. 31
1999 1998
-------------------- -------------------
(Millions)
<S> <C> <C>
Currency translation adjustment................................... $ (193) $ (122)
Minimum pension liability adjustment.............................. (32) (31)
Unrealized losses on marketable securities........................ (5) -
------ ------
Accumulated other comprehensive loss............................ $ (230) $ (153)
====== ======
</TABLE>
6. Cash Flow Information
---------------------
Cash payments for interest were $20 million and $23 million for the three
months ended March 31, 1999 and 1998, respectively. Net cash payments for
income taxes for the three months ended March 31, 1999 and 1998 were $17
million and $44 million, respectively.
-7-
<PAGE>
7. Business Segment Information
----------------------------
Effective December 31, 1998, PPG adopted Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information." Segment operating income and other unallocated corporate
(expense) income for the three months ended March 31, 1998 have been
restated to conform with the current year presentation format.
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------------------
1999 1998
-------------------- --------------------
(Millions)
<S> <C> <C>
Net sales:
Coatings (a)................................................ $ 912 $ 821
Glass....................................................... 557 687
Chemicals (b)............................................... 337 407
Intersegment net sales...................................... (3) (2)
------ ------
Total.................................................... $1,803 $1,913
====== ======
Operating income:
Coatings (c)................................................ $ 101 $ 127
Glass....................................................... 97 113
Chemicals................................................... 36 111
------ ------
Total.................................................... 234 351
Interest expense - net........................................ (25) (27)
Other unallocated corporate (expense) income - net............ (1) 4
------ ------
Income before income taxes and
minority interest........................................... $ 208 $ 328
====== ======
</TABLE>
(a) Includes intersegment net sales of $1 million for the three months
ended March 31, 1999.
(b) Includes intersegment net sales of $2 million for each of the three-
month periods.
(c) Includes for the three months ended March 31, 1999 a pre-tax
restructuring charge of $24 million associated with the integration of
recent packaging coatings acquisitions, including the disposal of a
redundant European facility and work-force reductions.
8. Commitments and Contingent Liabilities
--------------------------------------
PPG is involved in a number of lawsuits and claims, both actual and
potential, including some that it has asserted against others, in which
substantial money damages are sought. These lawsuits and claims relate to
product liability, contract, patent, environmental, antitrust and other
matters arising out of the conduct of PPG's business. The Company has been
named in a number of antitrust lawsuits alleging that PPG acted with
competitors to fix prices and allocate markets for certain glass products.
-8-
<PAGE>
These antitrust proceedings are in an early stage. PPG's lawsuits and
claims against others include claims against insurers and other third
parties with respect to actual and contingent losses related to
environmental matters. Management believes that, in the aggregate, the
outcome of all lawsuits and claims involving PPG will not have a material
effect on PPG's consolidated financial position, results of operations or
liquidity.
It is PPG's policy to accrue expenses for environmental contingencies when
it is probable that a liability has been incurred and the amount of loss
can be reasonably estimated. Reserves for environmental contingencies are
exclusive of claims against third parties and are not discounted. As of
March 31, 1999 and December 31, 1998, PPG had reserves for environmental
contingencies totaling $90 million and $94 million, respectively. Pre-tax
charges against income for environmental remediation costs for the three
months ended March 31, 1999 and 1998 totaled $2 million and $3 million,
respectively, and are included in "Other Charges" in the condensed
statement of income. Cash outlays related to such charges for the three
months ended March 31, 1999 and 1998 aggregated $6 million and $5 million,
respectively.
Management anticipates that the resolution of the Company's environmental
contingencies, which will occur over an extended period of time, will not
result in future annual charges against income that are significantly
greater than those recorded in recent years. It is possible, however, that
technological, regulatory and enforcement developments, the results of
environmental studies and other factors could alter this expectation. In
management's opinion, the Company operates in an environmentally sound
manner and the outcome of the Company's environmental contingencies will
not have a material effect on PPG's financial position or liquidity.
In addition to the amounts currently reserved, the Company may be subject
to loss contingencies related to environmental matters estimated to be as
much as $200 million to $400 million, which range is unchanged from
December 31, 1998. Such unreserved losses are reasonably possible but are
not currently considered to be probable of occurrence. Although insurers
and other third parties may cover a portion of these costs, to the extent
they are incurred, any potential recovery is not included in this
unreserved exposure to future loss. The Company's environmental
contingencies are expected to be resolved over an extended period of time.
Although the unreserved exposure to future loss relates to all sites, a
significant portion of such exposure involves three operating plant sites.
Initial remedial actions are occurring at these sites. Studies to determine
the nature of the contamination are reaching completion and the need for
additional remedial actions, if any, is presently being evaluated. The
loss contingencies related to the remaining portion of such unreserved
exposure include significant unresolved issues such as the nature and
extent of contamination, if any, at sites and the methods that may have to
be employed should remediation be required.
With respect to certain waste sites, the financial condition of any other
potentially responsible parties also contributes to the uncertainty of
estimating PPG's final costs. Although contributors of waste to sites
involving other potentially responsible parties may face governmental
agency assertions of joint and several liability, in general, final
allocations of costs are made based on the relative contributions of wastes
to such sites. PPG is generally not a major contributor to such sites.
-9-
<PAGE>
The impact of evolving programs, such as natural resource damage claims,
industrial site reuse initiatives and state voluntary remediation programs,
also adds to the present uncertainties with regard to the ultimate
resolution of this unreserved exposure to future loss. The Company's
assessment of the potential impact of these environmental contingencies is
subject to considerable uncertainty due to the complex, ongoing and
evolving process of investigation and remediation, if necessary, of such
environmental contingencies.
9. Subsequent Event
----------------
On April 28, 1999, the Company agreed to acquire the global automotive
refinish and industrial coatings businesses of Imperial Chemical Industries
PLC, with the exception of the businesses in the Indian subcontinent, for
425 million British pounds sterling or approximately $684 million. The
transaction is subject to regulatory approvals and the Company anticipates
a closing date in the next few months for the businesses located in Europe
and North and South America and later in 1999 for the businesses located in
Asia.
The 1998 sales of the businesses were approximately $459 million. The
Company intends to use the purchase method of accounting to record the
acquisition. The acquisition is expected to be funded through a
combination of cash generated from operations and external funding sources.
-10-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
---------------------
Performance Overview
Sales decreased 6% during the first quarter of 1999 to $1.80 billion from $1.91
billion in the first quarter of 1998. The overall sales decrease resulted from
a 6% decline due to the absence of sales from our European flat and automotive
glass businesses divested in July 1998 and a 4% decrease in sales associated
primarily with significantly lower prices for our chlorine and caustic soda
products. A 4% increase in volumes related principally to several acquisitions
made in late 1998 and early 1999 within the coatings segment partially offset
the lower overall sales.
The gross profit percentage decreased in the first quarter of 1999 to 38.8% from
40.1% in the same quarter of 1998. The decline in the gross profit percentage
resulted primarily from the combination of lower selling prices for our chlorine
and caustic soda products and unfavorable sales mix changes across all of our
operating segments. These unfavorable results were partially offset by ongoing
improvements in manufacturing efficiencies in our glass and coatings segments
and lower raw material and energy costs in our chemicals segment.
Net income and earnings per common share, diluted, for the first quarter of 1999
were $123 million and $0.70, respectively, compared to $192 million and $1.07,
respectively, for the first quarter of 1998. In addition to the factors that
contributed to a lower gross margin percentage, first quarter 1999 net income
was negatively impacted by a $20 million after-tax restructuring charge related
to the integration of recent packaging coatings acquisitions, lower operating
margins associated with recent acquisitions and the effects of the continued
economic weakness in Brazil and Asia. These negative factors were offset in
part by lower income tax expense due to a reduction in pre-tax earnings and a
lower effective tax rate.
Performance of Business Segments
Coatings sales increased 11% to $911 million from $821 million in the same
quarter of 1998. The substantial increase in sales volume in the first quarter
of 1999 is attributable principally to worldwide acquisitions in the second half
of 1998 and early 1999 and modest volume increases in our automotive original
and industrial coatings businesses in North America. Operating income decreased
to $101 million in the first quarter of 1999 from $127 million in the first
quarter of 1998. The decrease in operating income is attributable to a $24
million pre-tax restructuring charge for disposal of a redundant European
facility and work-force reductions related to the integration of recent
packaging coatings acquisitions, unfavorable sales mix changes, principally for
our automotive original coatings products in Europe, and the effects of the
economic weakness in Brazil. These negative factors were offset in part by
manufacturing efficiencies in our European automotive original and North
American architectural businesses and lower selling, general and administrative
expenses in our North American automotive original and industrial coatings
businesses.
Glass sales decreased 19% to $557 million in the first quarter of 1999 from $687
million in the same quarter of 1998. Sales declined 16% as a result of the
divestiture of our European flat and automotive glass businesses in July 1998,
2% from lower worldwide sales volumes for our electronic and specialty fiber
glass products and 2% principally from lower prices for our fiber glass
reinforcement products due to the worldwide pricing effects of the recessionary
Asian economies. These negative factors were partially offset by a 1% increase
in sales volumes primarily related to our North American automotive original and
replacement glass businesses. Operating income decreased to $97 million in the
first quarter of 1999 from $113 million in the
-11-
<PAGE>
same quarter of 1998. The combination of the absence of profits related to the
European flat and automotive glass businesses, lower fiber glass sales volumes
and pricing pressures discussed above and unfavorable sales mix changes in
certain businesses was partially offset by manufacturing efficiencies in our
automotive original and aircraft glass businesses.
Chemicals sales decreased 17% to $335 million in the first quarter of 1999 from
$405 million in the first quarter of 1998. Sales declined 17% as a result of
lower selling prices for chlorine and caustic soda products, due in part to the
worldwide pricing effects of the recessionary Asian economies and 3% due to
lower volumes for optical products. These negative factors were partially
offset by a 3% increase in volumes for our chlorine, caustic soda and other
chlor-alkali products. Operating income decreased to $36 million in the first
quarter of 1999 compared to $111 million in the same quarter of 1998. The
significant reduction in selling prices for chlorine and caustic soda products
and unfavorable sales mix changes were only slightly offset by lower raw
material and energy costs.
Other Factors
The increase in short-term borrowings principally results from the issuance of
commercial paper in the first quarter of 1999.
Acquisitions, Business Divestitures and Realignments
In January 1999, the Company completed the acquisition of the remaining portion
of the global packaging coatings business formerly owned by Courtaulds plc from
Akzo Nobel N.V. and completed the purchase of certain leased assets in
connection with its 1998 acquisition of the technical coatings business of Orica
Ltd. In February 1999, the Company acquired the commercial transport refinish
coatings business of Sigma Coatings B.V., a subsidiary of Belgian refiner
PetroFina S.A. The Company has completed preliminary purchase price allocations
for these acquisitions and the operating activity associated with these
acquisitions has been included in the Company's operations from the acquisition
dates. The preliminary purchase price allocations are subject to adjustment in
1999 when finalized.
In March 1999, the Company approved a restructuring plan associated with the
integration of recent packaging coatings acquisitions, which resulted in a pre-
tax charge of $24 million. The components of the plan included severance
benefits for 182 employees and an estimated loss of $14 million on the disposal
of a redundant European facility. As of March 31, 1999, $0.4 million of
severance benefits had been paid under the plan. It is anticipated that the
asset disposition and the payment of the remaining severance benefits will occur
within a year.
Conversion to the Euro
On January 1, 1999, eleven of the member countries of the European Monetary
Union converted from their sovereign currencies to a common currency, the euro.
At that time, fixed conversion rates between the legacy currencies and the euro
were set. The legacy currencies will remain legal tender from January 1, 1999
through July 1, 2002. Beginning January 1, 2002, euro-denominated currency will
be issued. No later than July 1, 2002, the participating countries will
withdraw all bills and coins so that their legacy currencies will no longer be
considered legal tender.
PPG has identified the significant issues that may result from the euro
conversion and is addressing them. These issues include increased competitive
pressures from greater price transparency, changes to information systems to
accommodate various aspects of the new currency and exposure to market risk with
respect to financial instruments. PPG does not
-12-
<PAGE>
expect the impact on its operating results or financial condition from the
conversion to be material.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of the Company. Management's
Discussion and Analysis and other sections of this Form 10-Q contain forward-
looking statements that reflect the Company's current views with respect to
future events and financial performance.
Forward-looking statements are identified by the use of the words "aim,"
"believe," "expect," "anticipate," "intend," "estimate" and other expressions
that indicate future events and trends. Any forward-looking statement speaks
only as of the date on which such statement is made and the Company undertakes
no obligation to update any forward-looking statement, whether as a result of
new information, future events or otherwise. You are advised, however, to
consult any further disclosures we make on related subjects in our Form 8-K and
10-K reports to the Securities and Exchange Commission. Also, note the
following cautionary statements.
Many factors could cause actual results to differ materially from the Company's
forward-looking statements. Among these factors are increasing price and
product competition by foreign and domestic competitors, fluctuations in the
cost and availability of raw materials, the ability to maintain favorable
supplier relationships and arrangements, economic and political conditions in
international markets, the ability to penetrate existing, developing and
emerging foreign and domestic markets, which also depends on economic and
political conditions, foreign exchange rates and fluctuations in those rates and
the uncertainties regarding the Year 2000 problem discussed below. Further, one
should understand that it is not possible to predict or identify all such
factors. Consequently, while the list of factors presented here is considered
representative, no such list, including the one here, should be considered to be
a complete statement of all potential risks and uncertainties. Indeed, unlisted
factors may present significant additional obstacles to the realization of
forward-looking statements.
The following discussion regarding Year 2000 issues, including the discussion of
the timing and effectiveness of implementation and the estimated cost of the
Company's Year 2000 efforts, contains forward-looking statements derived using
various assumptions of future events. These forward-looking statements involve
inherent risks and uncertainties and the actual results could differ materially
from those contemplated by such statements.
Factors that could cause material differences in results - many of which are
outside the control of the Company - include, but are not limited to:
. The Company's ability to locate and correct all relevant computer
software.
. The accuracy of representations by manufacturers of the Company's
computer systems and software that their products are Year 2000
compliant.
. The ability of the Company's suppliers, customers and other
counterparties to identify and resolve their own Year 2000 obligations
so as to allow them to continue normal business operations or furnish
products, services or data to the Company without disruption.
. The Company's ability to respond to unforeseen Year 2000 complications.
-13-
<PAGE>
The consequences of material differences in the results as compared to those
anticipated in the forward-looking statements could include, among other things,
business disruption, operational problems, financial loss, legal liability to
third parties and similar risks, any of which could have a material adverse
effect on the Company's consolidated financial condition, operations or
liquidity.
Year 2000 Readiness Disclosure
Background. Many existing information technology (IT) products and systems and
non-IT products and systems containing embedded microchip processors, were
originally programmed to represent any calendar dates by using six digits (for
example, 12/31/99), as opposed to eight digits (for example, 12/31/1999).
Accordingly, such products and systems may experience miscalculations,
malfunctions or disruptions when attempting to process information containing
dates that fall after December 31, 1999, or other dates that could cause
computer malfunctions. These potential problems are collectively referred to as
the "Year 2000" problem.
State of Readiness. Recognizing the importance of Year 2000 issues, the Company
has established a corporate-wide Year 2000 Steering Committee made up of certain
senior executives of the Company. The Committee is responsible for overseeing
the Company's efforts to assess and address the Year 2000 problem as it may
affect the Company. The scope of the Company's efforts includes: (1) an
assessment, and where needed a remediation, of both IT and non-IT elements of
its business information, computing, telecommunications and process control
systems; (2) an assessment, and remediation, as necessary, of equipment with
embedded computer chips and (3) an evaluation of the Company's relationships
with material third parties as they may be impacted by the Year 2000 problem.
The phases of the Company's Year 2000 compliance plan are: (1) Internal
Assessment - a detailed evaluation of the potential Year 2000 effects on the
Company's IT and non-IT systems and on its equipment with embedded computer
chips; (2) Remediation - corrective action including code enhancements, hardware
and software upgrades, system replacements, vendor certification, equipment
repair or replacement and other associated changes to achieve Year 2000
compliance; (3) Testing - the verification that remediation actions are
effective; (4) Third- Party Evaluation - an evaluation of the Year 2000
readiness of key suppliers of goods and services and of key customers and (5)
Contingency Planning - the development of detailed procedures to be put in place
should the Company or key suppliers or customers experience a significant Year
2000 problem. These phases sometimes overlap.
The assessment phase is complete with the exception of certain recently acquired
businesses where the assessment phase is in progress and is expected to be
completed by June 30, 1999. The remediation and testing efforts are well under
way on all critical IT and non-IT systems and the Company presently anticipates
that it will substantially complete remediation of such critical systems by June
30, 1999 and that remediation and testing of all remaining systems will be
completed by December 31, 1999. Once systems undergo remediation, they are
tested for Year 2000 compliance. For major systems, the testing process usually
involves subjecting the remediated system to a simulated change of date from the
year 1999 to the year 2000 using, in many cases, computer resources dedicated to
that purpose so that normal computing activity is not interrupted or adversely
affected by the testing. The Company is currently in the process of testing a
number of the most critical IT and non-IT systems and expects to complete, in
all material respects, testing of all internal systems prior to the year 2000.
The Year 2000 Steering Committee will continue to review Year 2000 compliance
efforts on an ongoing basis.
-14-
<PAGE>
In the third-party evaluation phase, the Company has identified and contacted
materially significant suppliers of goods or services in an effort to determine
the state of readiness of these important third parties. Materially significant
suppliers for this purpose are considered to be those from whom the Company
purchases a significant dollar amount of goods or services and those who supply
goods or services that are critical to uninterrupted production by the Company
of its products, including those who are sole-source suppliers of important
goods or services. Written assurances that these materially significant
suppliers are progressing toward timely Year 2000 compliance have been received
from approximately 95% of the Company's materially significant suppliers. The
Company is also in the process of identifying and investigating the Year 2000
readiness of its materially significant customers. Materially significant
customers for this purpose are considered to be those to whom the Company sells
a significant dollar amount of goods.
If materially significant suppliers or customers or a number of less substantial
suppliers or customers do not convert their systems in a timely manner, or are
themselves adversely affected by a lack of Year 2000 readiness on the part of
their suppliers or customers, it could have a material adverse effect on the
Company's operations, liquidity or consolidated financial condition. The
Company believes that its continuing efforts to gain assurances of Year 2000
compliance from materially significant suppliers and its investigative efforts
with respect to the readiness of materially significant customers will minimize
these risks. Nonetheless, the actual readiness of these third parties is beyond
the Company's control.
Costs. The Company is using both internal and external resources to execute its
Year 2000 compliance plan. The Company currently estimates the incremental cost
of resolving the Year 2000 issue at approximately $20 to $25 million. The
Company spent $7 million during 1998, representing the incremental cost of
resolving the Year 2000 issue and anticipates the expenditure of an additional
$13 to $18 million during 1999. Approximately 50% of the total Year 2000 costs
are expected to be expended on equipment or software replacement and the
remainder on remediation and testing of existing systems.
All Year 2000 costs are expected to be funded from the Company's operating cash
flow. The Company is expensing as incurred all costs related to the assessment,
remediation and testing of the Year 2000 issue, unless new systems or equipment
are purchased. In those instances, such costs are capitalized and charged to
expense over the useful lives of those assets in accordance with the Company's
existing policy. These cost estimates are based on currently available
information and may be subject to change.
Risks. If needed modifications and conversions of computer systems are not made
on a timely basis by the Company or its materially significant suppliers or
customers, the Company could be affected by business disruption, operational
problems, financial loss, legal liability to third parties and similar risks,
any of which could have a material adverse effect on the Company's consolidated
financial condition, operations or liquidity. Although not anticipated, the
most reasonably likely worst-case scenario of failure by the Company or its key
suppliers or customers to resolve the Year 2000 issue would be a short-term
slowdown or cessation of manufacturing operations at one or more of the
Company's facilities and a short-term inability on the part of the Company to
process orders and billings in a timely manner and to deliver product to
customers.
Contingency Planning. While the Company continues to focus on solutions for
Year 2000 issues and expects to be Year 2000 compliant in a timely manner, the
Company is in the process of developing contingency plans. Such plans will set
forth the Company's responses
-15-
<PAGE>
should the Company or materially significant third parties with which it has
relationships not achieve Year 2000 compliance in a timely manner. The Company
expects to finalize its contingency plans by June 30, 1999.
Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective for fiscal years beginning after
June 15, 1999. The Company is currently evaluating the prospective impact of
this standard on its financial position and results of operations.
Commitments and Contingent Liabilities, including Environmental Matters
PPG is involved in a number of lawsuits and claims, both actual and potential,
including some that it has asserted against others, in which substantial money
damages are sought. These lawsuits and claims relate to product liability,
contract, patent, environmental, antitrust and other matters arising out of the
conduct of PPG's business. The Company has been named in a number of antitrust
lawsuits alleging that PPG acted with competitors to fix prices and allocate
markets for certain glass products. These antitrust proceedings are in an early
stage. PPG's lawsuits and claims against others include claims against insurers
and other third parties with respect to actual and contingent losses related to
environmental matters. Management believes that, in the aggregate, the outcome
of all lawsuits and claims involving PPG will not have a material effect on
PPG's consolidated financial position, results of operations or liquidity.
It is PPG's policy to accrue expenses for environmental contingencies when it is
probable that a liability has been incurred and the amount of loss can be
reasonably estimated. Reserves for environmental contingencies are exclusive of
claims against third parties and are not discounted. As of March 31, 1999 and
December 31, 1998, PPG had reserves for environmental contingencies totaling $90
million and $94 million, respectively. Pre-tax charges against income for
environmental remediation costs for the three months ended March 31, 1999 and
1998 totaled $2 million and $3 million, respectively, and are included in "Other
Charges" in the condensed statement of income. Cash outlays related to such
charges for the three months ended March 31, 1999 and 1998 aggregated $6 million
and $5 million, respectively.
Management anticipates that the resolution of the Company's environmental
contingencies, which will occur over an extended period of time, will not result
in future annual charges against income that are significantly greater than
those recorded in recent years. It is possible, however, that technological,
regulatory and enforcement developments, the results of environmental studies
and other factors could alter this expectation. In management's opinion, the
Company operates in an environmentally sound manner and the outcome of the
Company's environmental contingencies will not have a material effect on PPG's
financial position or liquidity.
In addition to the amounts currently reserved, the Company may be subject to
loss contingencies related to environmental matters estimated to be as much as
$200 million to $400 million, which range is unchanged from December 31, 1998.
Such unreserved losses are reasonably possible but are not currently considered
to be probable of occurrence. Although insurers and other third parties may
cover a portion of these costs, to the extent they are incurred, any potential
recovery is not included in this unreserved exposure to future loss. The
Company's environmental contingencies are expected to be resolved over an
extended period of time.
-16-
<PAGE>
Although the unreserved exposure to future loss relates to all sites, a
significant portion of such exposure involves three operating plant sites.
Initial remedial actions are occurring at these sites. Studies to determine the
nature of the contamination are reaching completion and the need for additional
remedial actions, if any, is presently being evaluated. The loss contingencies
related to the remaining portion of such unreserved exposure include significant
unresolved issues such as the nature and extent of contamination, if any, at
sites and the methods that may have to be employed should remediation be
required.
With respect to certain waste sites, the financial condition of any other
potentially responsible parties also contributes to the uncertainty of
estimating PPG's final costs. Although contributors of waste to sites involving
other potentially responsible parties may face governmental agency assertions of
joint and several liability, in general, final allocations of costs are made
based on the relative contributions of wastes to such sites. PPG is generally
not a major contributor to such sites.
The impact of evolving programs, such as natural resource damage claims,
industrial site reuse initiatives and state voluntary remediation programs, also
adds to the present uncertainties with regard to the ultimate resolution of this
unreserved exposure to future loss. The Company's assessment of the potential
impact of these environmental contingencies is subject to considerable
uncertainty due to the complex, ongoing and evolving process of investigation
and remediation, if necessary, of such environmental contingencies.
Subsequent Event
On April 28, 1999, the Company agreed to acquire the global automotive refinish
and industrial coatings businesses of Imperial Chemical Industries PLC, with the
exception of the businesses in the Indian subcontinent, for 425 million British
pounds sterling or approximately $684 million. The transaction is subject to
regulatory approvals and the Company anticipates a closing date in the next few
months for the businesses located in Europe and North and South America and
later in 1999 for the businesses located in Asia.
The 1998 sales of the businesses were approximately $459 million. The Company
intends to use the purchase method of accounting to record the acquisition. The
acquisition is expected to be funded through a combination of cash generated
from operations and external funding sources.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
There were no material changes in the Company's exposure to market risk from
December 31, 1998.
-17-
<PAGE>
PART II. OTHER INFORMATION
Item 2. Change in Securities and Use of Proceeds
- -------------------------------------------------
Directors who are not also Officers of the Company receive Common Stock
Equivalents pursuant to the Deferred Compensation Plan for Directors and the
Directors' Common Stock Plan. Common Stock Equivalents are hypothetical shares
of Common Stock having a value on any given date equal to the value of a share
of Common Stock. Common Stock Equivalents earn dividend equivalents that are
converted into additional Common Stock Equivalents but carry no voting rights or
other rights of a holder of Common Stock. The Common Stock Equivalents credited
to Directors under both plans are exempt from registration under Section 4(2) of
the Securities Act of 1933 as private offerings made only to Directors of the
Company in accordance with the provisions of the plans.
Under the Company's Deferred Compensation Plan for Directors, each Director must
defer receipt of such compensation as the Board mandates. Currently, the Board
mandates deferral of one-third of each payment of the basic annual retainer of
each Director. Each Director may also elect to defer the receipt of (1) an
additional one-third of each payment of the basic annual retainer, (2) all of
the basic annual retainer, or (3) all compensation. All deferred payments are
held in the form of Common Stock Equivalents. Payments out of the deferred
accounts are made in the form of Common Stock of the Company (and cash as to any
fractional Common Stock Equivalent). In the first quarter of 1999, the
Directors, as a group, were credited with 5,236 Common Stock Equivalents under
this Plan. The values of the Common Stock Equivalents, when credited, ranged
from $51.25 to $53.75.
Under the Directors' Common Stock Plan, each Director who neither is nor was an
employee of the Company is credited annually with Common Stock Equivalents worth
one-half of the Director's basic annual retainer. Upon termination of service
and attaining 70 years of age, the Common Stock Equivalents held in a Director's
account are converted to and paid in Common Stock of the Company (and cash as to
any fractional Common Stock Equivalent). In the first quarter of 1999, the
Directors, as a group, received 261 Common Stock Equivalents under this Plan.
The value of each Common Stock Equivalent, when credited, was $53.13.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
At the Company's Annual Meeting of Shareholders held on April 15, 1999 (the
Annual Meeting), the shareholders voted on the election of three directors to
serve for the terms indicated in the proxy statement relating to the Annual
Meeting. The vote was as follows:
<TABLE>
<CAPTION>
Nominees Votes For Votes Withheld
-------- --------- --------------
<S> <C> <C>
Michele J. Hooper 138,072,446 2,648,932
Raymond W. LeBoeuf 137,957,972 2,763,406
David G. Vice 138,165,669 2,555,709
</TABLE>
There were no broker non-votes with respect to this matter. Each of the nominees
was elected to serve as a director for the terms indicated in the proxy
statement relating to the Annual Meeting.
-18-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
(10) Directors' Common Stock Plan.
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
(1) The Company did not file any reports on Form 8-K during the
three months ended March 31, 1999.
-19-
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PPG INDUSTRIES, INC.
---------------------------------------
(Registrant)
Date: April 30, 1999 By /s/ W. H. Hernandez
---------------------------------------
W. H. Hernandez
Senior Vice President, Finance
(Principal Financial and
Accounting Officer and
Duly Authorized Officer)
-20-
<PAGE>
PPG INDUSTRIES, INC. AND SUBSIDIARIES
-------------------------------------
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
(10) Directors' Common Stock Plan.
(12) Computation of Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedule.
<PAGE>
Exhibit 10
PPG INDUSTRIES, INC.
DIRECTORS' COMMON STOCK PLAN
----------------------------
1. PURPOSE. The purpose of this Plan is to align the financial interests of
-------
the Company's shareholders with those of its Non-Employee Directors by
providing such Directors with compensation in the form of Company Common
Stock.
2. DEFINITIONS.
-----------
"Account" means the account maintained for each Non-Employee Director to
which Common Stock Equivalents and Dividend Equivalents are credited.
"Annual Contribution" means the Common Stock Equivalents credited to an
Account each year under Section 4.1.
"Board" means the Board of Directors of the Company.
"Change in Control" has the same meaning as given to that term in the PPG
Industries, Inc. Deferred Compensation Plan for Directors, as such plan may
be amended from time to time.
"Committee" means the Officers-Directors Compensation Committee of the
Board.
"Common Stock" means the common stock, par value $1.66 2/3 per share, of
the Company.
"Common Stock Equivalent" means a hypothetical share of Common Stock.
"Company" means PPG Industries, Inc.
"Dividend Equivalent" means an additional number of Common Stock
Equivalents the Company shall credit to each Account as of each dividend
payment date declared with respect to the Company's Common Stock. The
additional number of Common Stock Equivalents to be credited to each
Account shall be equal to:
<PAGE>
(a) the product of (i) the dividend per share of the Common Stock
which is payable as of the dividend payment date, multiplied by
(ii) the number of whole Common Stock Equivalents credited to the
Account as of the applicable dividend record date;
DIVIDED BY
----------
(b) the closing price of a share of the Common Stock on the dividend
payment date (or if such stock was not traded on that date, on
the next preceding date on which it was traded), as reported in
the New York Stock Exchange Composite Transactions.
"Eligible Spouse" means the spouse who is legally married to a Participant
at the time of his or her death.
"Non-Employee Director" means a director of the Company who is not a
present or former employee of the Company or any of its subsidiaries.
"Participant" means a Non-Employee Director who has become eligible to
receive benefits under this Plan. A Non-Employee Director becomes a
Participant when he or she (1) resigns from the Board and (2) attains 70
years of age; provided however, that the Committee may waive the
requirement that the Participant attain 70 years of age.
"Plan" means the PPG Industries, Inc. Directors' Common Stock Plan.
"Retainer" means the base annual retainer fee paid to each Non-Employee
Director by the Company. It does not include committee retainer fees,
meeting attendance fees, committee chairperson's retainer fees or any other
compensation other than the base annual retainer fee.
"Service" means the period of time a Non-Employee Director serves on the
Board.
3. EFFECTIVE DATE. This Plan shall be effective on and after January 1, 1988.
--------------
2
<PAGE>
4. CREDITING ACCOUNTS.
------------------
4.1 Each year on the day following the Annual Meeting of Shareholders of the
Company, the Company shall credit the Account of each Non-Employee Director
who serves on the Board on that day with the number of Common Stock
Equivalents determined by dividing one-half of such Director's Retainer by
the average closing price of the Common Stock in the New York Stock
Exchange Composite Transactions during the 5 days for which such price is
available immediately preceding such day of crediting. The Account of any
person who ceases to be a Director prior to April 16, 1999, shall be
credited with no more than 10 such Annual Contributions and the total
number of such Annual Contributions made to his or her Account under this
Section 4.1 plus the number which is multiplied by $10,000 to determine the
amount credited to the Account under Section 4.2 will not exceed 10. Any
Non-Employee Director who is a Director of the Company on or after April
16, 1999 and whose total number of Annual Contributions was limited to 10
under the Plan in effect prior to April 16, 1999, shall have credited to
his or her Account such additional Annual Contributions and Dividend
Equivalents as are necessary so that such Account is credited with the
number of Common Stock Equivalents it would have had credited if such
limitation had never existed.
4.2 On the day following the 1988 Annual Meeting of Shareholders of the
Company, the Company shall credit the Account of each Non-Employee Director
who is age 61 or older on that date with the number of Common Stock
Equivalents determined by (1) multiplying $10,000 times his or her number
of full fiscal years of Service, but such number of full fiscal years of
Service shall not exceed the number determined by subtracting 60 from the
Non-Employee Director's age on the day immediately following the 1988
Annual Meeting of Shareholders and (2) then dividing that amount by the
average closing price of the Common Stock in the New York Stock Exchange
Composite Transactions during the 5 days for which such price is available
immediately preceding such day.
3
<PAGE>
5. PAYMENTS OF BENEFITS.
--------------------
5.1 Only Participants or Eligible Spouses will receive benefits under this
Plan. Except as set forth in Section 5.4, the Account of a Non-Employee
Director will be forfeited if he or she does not become a Participant.
5.2 Benefits will be paid in the form of Common Stock (and cash for any
remaining partial shares of Common Stock as described below) in annual
installments each year on May 1 (or on the next business day if May 1 is
not a business day) commencing the first May 1 the Participant is eligible
to receive benefits; provided, however, that the first payment to a
Participant shall not be made until 6 months and 10 days after the
Participant ceases to be a Non-Employee Director. The number of annual
installments paid to each Participant shall be equal to his or her number
of full fiscal years of Service, but shall not exceed 10 annual
installments. The number of shares of Common Stock attributable to each
installment shall be equal to the whole number obtained by dividing the
number of Common Stock Equivalents then credited to the Participant's
Account by the number of unpaid installments. Common Stock Equivalents
with respect to which payment has not yet occurred shall continue to be
credited with Dividend Equivalents. As of the date on which the last
payment of benefits is made to any Participant, the Company shall pay the
Participant, in cash, the value of any remaining fractional Common Stock
Equivalent based on the closing sale price of the Common Stock on the New
York Stock Exchange Composite Transactions on the last date for which such
price is available prior to the payment date. Notwithstanding the
foregoing, payments from the account of any Participant who ceased to be
director of the Company before August 15, 1996 shall continue to be paid in
the manner provided by the Plan as effective on August 15, 1996.
5.3 If a Non-Employee Director dies prior to resigning, or after resigning from
the Board but before becoming eligible to receive benefits hereunder, he or
she shall be deemed to have become a Participant eligible to receive
benefits hereunder immediately prior to his or her death, and such benefits
shall be paid to the Participant's Eligible Spouse. If a Participant dies
after becoming eligible to receive benefits hereunder, but prior to
receiving all the benefits due him or her hereunder, such remaining
benefits shall
4
<PAGE>
be paid to the Participant's Eligible Spouse. Unpaid benefits under this
Plan will be forfeited in the event the Participant's death and
Participant's Eligible Spouse's death occur prior to the total amount of
benefits due hereunder having been paid.
6. CHANGES IN STOCK. In the event of any change in the outstanding shares of
----------------
the Common Stock, or in the number thereof, by reason of any stock dividend
or split, recapitalization, merger, consolidation, exchange of shares or
other similar change, a corresponding change will be made in the number of
Common Stock Equivalents and Dividend Equivalents, if any, credited to each
Account, unless the Committee determines otherwise.
7. ACCELERATION. The Committee, in its sole discretion, may accelerate the
------------
payment of benefits hereunder to any Participant or his or her Eligible
Spouse for reasons of changes in tax laws or in the event of a Change in
Control of the Company; provided that no payment of benefits may be
accelerated hereunder to any Participant or his or her Eligible Spouse if
such Participant was a director of the Company on or after November 1,
1990.
An exception is provided for any Non-Employee Director if any income tax
laws to which he or she is subject would cause him/her to be immediately
taxed on amounts credited under the Plan. Under this exception, the
requirement that age 70 be attained before a Non-Employee Director becomes
a Participant is automatically waived by the Committee. Additionally,
under this exception, the payment of all benefits under the Plan shall
occur on the first business day which is 6 months and 10 days after the
earlier of a Participant's resignation from the Board or death. In the
event of such Non-Employee Director's death, either while still an active
member of the Board or after resignation from the Board but before receipt
of payment from the Plan, payment shall be made to the Participant's
Eligible Spouse on the above referenced date.
8. CHANGE IN CONTROL. Upon, or in reasonable anticipation of, a Change in
-----------------
Control (as defined above), the Company shall immediately make a payment in
cash to a trustee on such terms as the Senior Vice President, Human
Resources, and Administration and the Senior Vice President, Finance, or
either of them, shall deem appropriate (including such terms as are
appropriate to
5
<PAGE>
cause such payment, if possible, not to be a taxable event to Participants)
of a sufficient amount to insure that Participants receive the payment of
all amounts as contemplated under the Plan.
9. GENERAL PROVISIONS. The entire cost of benefits and administrative
------------------
expenses for this Plan shall be paid by the Company. This Plan is purely
voluntary on the part of the Company. The Company, by action of the Board
or, except as limited by the Company's bylaws, the Committee, may amend,
suspend or terminate this Plan in whole or part at any time, but no such
amendment, suspension or termination shall adversely affect the rights of
any Non-Employee Director or Eligible Spouse of a deceased Non-Employee
Director with respect to Common Stock Equivalents and Dividend Equivalents
credited prior to such amendment, suspension or termination or Dividend
Equivalents which would otherwise have been credited in the future with
respect to Common Stock Equivalents credited prior to such amendment,
suspension or termination.
As Amended April 15, 1999
6
<PAGE>
Exhibit 12
----------
<TABLE>
<CAPTION>
PPG INDUSTRIES, INC. AND CONSOLIDATED SUBSIDIARIES
Computation of Ratio Of Earnings to Fixed Charges
(Dollars in Millions)
Year Ended December 31 Three Months
--------------------------------------------- Ended
1994 1995 1996 1997 1998 March 31, 1999
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Earnings before income taxes $ 840 $ 1,247 $ 1,215 $ 1,149 $ 1,267 $ 202
Plus:
Fixed charges exclusive of capitalized interest 108 113 124 136 139 34
Amortization of capitalized interest 11 12 13 13 12 3
Adjustments for equity affiliates and minority interest (2) (4) (3) 0 (2) (1)
--------------------------------------------------------------
Total $ 957 $ 1,368 $ 1,349 $ 1,298 $ 1,416 $ 238
==============================================================
Fixed Charges:
Interest expense including amortization of debt
discount/premium and debt expense $ 88 $ 91 $ 102 $ 113 $ 114 $ 27
Rentals - portion representative of interest 20 22 22 23 25 7
--------------------------------------------------------------
Fixed charges exclusive of capitalized interest 108 113 124 136 139 34
Capitalized interest 5 9 12 10 9 3
--------------------------------------------------------------
Total $ 113 $ 122 $ 136 $ 146 $ 148 $ 37
==============================================================
Ratio of earnings to fixed charges 8.4 11.3 9.9 8.9 9.6 6.4
==============================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PPG
INDUSTRIES, INC., MARCH 31, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 82
<SECURITIES> 0
<RECEIVABLES> 1,438
<ALLOWANCES> 0
<INVENTORY> 948
<CURRENT-ASSETS> 2,725
<PP&E> 6,734
<DEPRECIATION> 3,860
<TOTAL-ASSETS> 7,435
<CURRENT-LIABILITIES> 2,045
<BONDS> 1,066
0
0
<COMMON> 484
<OTHER-SE> 2,313
<TOTAL-LIABILITY-AND-EQUITY> 7,435
<SALES> 1,803
<TOTAL-REVENUES> 1,803
<CGS> 1,103
<TOTAL-COSTS> 1,103
<OTHER-EXPENSES> 203
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26
<INCOME-PRETAX> 208
<INCOME-TAX> 79
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.70
</TABLE>
